Five years later, aide recalls Madoff's arrest on witness stand

NEW YORK, Dec 11 (Reuters) - Exactly five years ago, FrankDiPascali was awakened in his New Jersey home by an early callfrom his boss, Bernard Madoff.

"He said, 'Frank, the FBI is in the office with mybrother,'" DiPascali said in federal court in New York onWednesday. "I said, 'Why are you calling me?' And I threw myphone across the room."

The longtime Madoff deputy was speaking on the fifthanniversary of Madoff's arrest on Dec. 11, 2008, which markedthe collapse of his decades-long Ponzi scheme.

DiPascali, who has pleaded guilty to his part in the scheme,was testifying at the trial of five former Madoff employees whoare charged with helping the financier conceal his fraud fromcustomers, government regulators and Wall Street.

Madoff is serving a 150-year prison sentence. He has deniedthat the five defendants aided in his scheme.

FAKING OUT THE FEDS

In a week of testimony so far, DiPascali has said all fivetook part in creating fake records to hide the fact that notrading was occurring in any customer accounts.

On Tuesday, DiPascali had testified that Madoff told himthat the firm was broke only days before he was arrested.

As the trial continued on Wednesday, DiPascali said he thenpanicked, throwing an unregistered gun he had received as a giftinto his pond and destroying a flash drive that containedevidence of fake records.

"It was ridiculous," he said, because he knew there wereother copies at the office.

At the office in New York on Dec. 10, he said he saw BernardMadoff's wife, Ruth, and that she looked "catatonic," addingthat it was obvious to him Madoff had told her about the fraud'sextent.

"I touched her cheek and said, 'Ruthie, it's going to beOK,'" he testified.

"Did you believe it was going to be OK?" Assistant U.S.Attorney John Zach asked.

"No," DiPascali said.

On his way to the office on Dec. 11, he got a call fromPeter Madoff, Bernard's brother, telling him that Bernard Madoffhad been taken into custody. Throughout the day, DiPascaliprovided falsified records to federal agents and lied to themabout what he knew, he said.

At one point, Peter Madoff walked into the conference roomwhere investigators had convened and dropped stacks of recordsfor the firm's main bank account at JPMorgan Chase & Co,DiPascali said.

Under his breath, Peter Madoff said "something to the effectof, 'This is where the secrets are,'" DiPascali testified.

Zach then took DiPascali through his decision to cooperateand eventually plead guilty, asking him what had happened to hishouse, his cars and his boat, all of which were seized byfederal authorities.

"How much money do you have right now on your own?" Zachasked.

"The $14 in my pocket," replied DiPascali, who is out onbail, but under house arrest.

He faces up to 125 years in prison.

Later on Wednesday, Larry Krantz, the defense lawyer forPerez, began what is likely to be several days ofcross-examination by emphasizing that DiPascali spent the betterpart of three decades lying to customers, regulators and fellowemployees about the fraud, in an effort to undermine hiscredibility as a witness.

"Is it fair to say that you got pretty good at conningpeople?" he asked.

"I never took a survey," DiPascali answered.

The case is USA v. O'Hara et al, U.S. District Court for theSouthern District of New York, No. 10-cr-0228.